Researchers: CHIP Does Not Crowd Out Much Private Coverage

The Children’s Health Insurance Program (CHIP) might be crowding out a little bit of private health coverage, but probably not that much, and it’s helped many children get health coverage.

Sheila Hoag and other researchers give that assessment of CHIP in a report submitted by Mathematica Policy Research Inc., Princeton, N.J., to Congress.

Congress created CHIP in 1997, with a provision in the Balanced Budget Act of 1997, in an effort to reduce the number of children without any kind of public or private health coverage. Lawmakers were especially interested in providing coverage for children of low-income working parents and guardians with earnings that exceed Medicaid eligibility cut-offs.

Even many policymakers who believe that government efforts to provide health care for adults distort the health care market supported CHIP, because, they say, children have no independent ability to decide whether to buy health coverage.

But CHIP critics and some supporters have questioned whether CHIP might make matters worse in some cases, by leading employers that provide high-quality group benefits to dump children into taxpayer-dollar-guzzling CHIP plans that might offer inferior benefits and drain resources from private carriers.

Congress tried to get more information about whether CHIP is crowding out private coverage by including a provision in the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) that required the Office of the Assistant Secretary for Planning and Evaluation (ASPE) at the U.S. Department of Health and Human Services (HHS) to report on CHIP program performance after the end of federal fiscal year 2010 and again after the end of federal fiscal year 2013.

The federal fiscal year starts Oct. 1 and ends Sept. 30.

ASPE hired Mathematica to create the report, and Mathematica hired Hoag, a researcher at the Urban Institute, Washington, to lead the report team.

Since Congress created CHIP, the number of children without health coverage has fallen to about 8 million, or

about 10% of the total, from 11.4 million, or 15% of the total, Hoag and her colleagues write.

State CHIP plans enrolled 7.7 million children at some point in fiscal year 2010, and about 90% of those children were in families with family incomes under 200% of the federal poverty level.

HHS and the CHIP statutes let states take a wide variety of approaches to running CHIP plans. All but 3 states – Alaska, Idaho and North Dakota – cover at least some children with family incomes over 200% of the federal poverty level, the researchers say.

To keep CHIP from crowding out private coverage, most states require children to have gone without any kind of health coverage for some period before the children can become eligible for CHIP coverage.

Twenty-seven states use databases to see whether children applying for CHIP coverage have gone without other coverage for the required length of time, the researchers say.

“An extensive literature on the substitution topic has yielded widely varying estimates of how much the gains in public coverage are related to declines in private coverage,” the researchers say. “While studies differ in their methods and data sources, existing evidence indicates that some level of crowd out is unavoidable but the magnitude of substitution is lower than many expected and concerns about CHIP substituting for private coverage have lessened over time.”

Researchers who looked at the program early on were estimating that 0% to 60% of the increase in public children’s health coverage enrollment came from reductions in private coverage enrollment, the researchers say.

Meanwhile, from 1997 to 2010, the percentage of children with family incomes below 200% of the federal poverty level who had no health coverage of any kind fell to 15% in 2010, from 25% in 1997, even as the percentage of low-income adults without health coverage increased, the researchers say.